9th Bank Failure of the Year - Slavie Federal Savings Bank in Maryland

One small Maryland bank, Slavie Federal Savings Bank, was closed by the OCC on Friday. It was the first bank failure in Maryland since April 2012. The FDIC arranged for Bay Bank, FSB to assume all deposits.

When the spring season started, bank failures had become rare. Before May 16th there had been only one bank failure this spring and only six bank failures for the year. That changed on May 16th. A bank has failed on each of the last three Fridays.

The total number of bank failures for the year is now 9. Compared to last year, that’s still low this far into the year. At about this time last year there had been 14 bank failures, and for all of 2013 there had been 24 bank failures. If the current pace continues for 2014, there will be around 21 bank failures for the year. The frequency of bank failures has declined since 2010 when 157 banks failed. In good economic times, bank failures have been rare. For example, no banks failed in 2005 and 2006, and only 3 banks failed in 2007.

This bank closure was typical in that the FDIC was able to find a buyer. Consequently, no one lost any money. According to the FDIC FAQs:

No one lost any money on deposit as a result of the closure of this bank. All deposits, regardless of dollar amount, were transferred to Bay Bank, FSB.

CD customers of Slavie Federal Savings Bank will have to wait to see what happens with their rates. According to Bay Bank’s FAQs:

We are in the process of evaluating the rates on our interest bearing deposit accounts. If your certificate of deposit rates are affected by this transition, you will receive a "Notice of Rate Changes to Interest Bearing Deposits" in the mail shortly advising you of any changes. Please read the document carefully.

You can withdraw some or all of your funds from your Certificates of Deposit without penalty until you enter a new agreement with Bay Bank, provided you are not using your deposits to secure a loan.

Financial Ratings Notes: 0 star is lowest at BauerFinancial, 1 star is lowest at Bankrate.com and an F is lowest at DepositAccounts.com &, Texas Ratios over 100% is considered at risk. Ratings at DepositAccounts.com are based on March 31, 2013 data. Ratings at BauerFinancial and at Bankrate.com are based on December 31, 2013 data.

IMO, all problem banks should be closed. Apparently, the bank officers are doing a very poor job of managing the finances and still collecting their paychecks. All they do is contribute to fuel a drag on the economy.

Any small bank (under $1 Billion in deposits) can not compete with the big five who get their money very cheap and lend them out bellow the small banks rates. The lending is a cut throat business and one 100 of one percent counts a lot on a million dollar loan.